Zais Financial in Red Bank, N.J., may shut down its business and liquidate its holdings if it can't a buyer or a merger partner.
Zais in November hired the investment bank Houlihan Lokey Capital to explore strategic alternatives, including a potential sale or merger. Zais has engaged in "preliminary discussions with several potential counterparties," but no agreements have been finalized, according to a Wednesday news release. If Zais cannot find a partner, management plans to present its board with a liquidation plan. Zais did not disclose its deadline for finding a partner.
Because of its review of strategic options, and to reduce market risk in its investment portfolio, Zais has begun selling seasoned, reperforming residential mortgage loans. The asset sale is expected to be completed by the early second quarter.
Zais also has ceased buying newly originated residential mortgage loans.
The potential liquidation comes as Zais is losing money. The real estate investment trust posted a fourth-quarter loss of $1.8 million, or 21 cents per share. In the year-ago period, Zais recorded net income of $200,000, or 2 cents per share.
Zais also disclosed on Wednesday that its chief investment officer, Brian Hargrave, quit. He was replaced by Chairman Christian Zugel.
